May 13, 2009 - New York - Despite its having been touted as a way to close budget gaps, city and state officials have backed off plans to crack down on the $1.6 billion black market for cigarettes. The sole city unit targeting illegal tobacco full time has been reassigned, and a new law aimed at Indian reservations -- the prime source of the butts -- hasn't been enforced.A city squad formed in 2007 to sting stores selling unstamped, untaxed cigarettes -- which cost the city $195 million in lost tax revenue a year -- has been reassigned by the Finance Department.

The switch was one of the last moves made by Finance Commissioner Martha Stark, who resigned on April 28 after a city probe, sparked by a Post exposé, found that she had hired relatives and was dating an ex-subordinate.

Meanwhile, a law signed by Gov. Paterson in December was supposed to make enforcement on reservations easier but has been deemed unenforceable by courts.Before it passed, Mayor Bloomberg urged the state to act and said it "could go a long ways in closing our budget gap."

Rulings require the state to hand out coupons to the reservations so that residents can exchange them for tax-free cigarettes. "The state has not handed out the coupons," said city lawyer Eric Proshansky. "The law cannot be enforced unless those coupons are distributed." A Paterson spokesman declined comment.